Tax Implications on Affiliate Income in UK

What exactly is an Affiliate Programme?

The affiliate program gives rise to affiliate income. The easiest way of describing the affiliate program is to say that you get paid through a referral code. You list the product or service on your website, and when a consumer orders the same, you get paid in a percentage.

Referral income is also known as a commission payment.

How much do companies pay for the Affiliate Program?

The affiliate program for different companies is different. Various companies and websites offer a different percentage. Some companies, like Amazon, every article you list will have a different amount of commission.

How do you pay taxes on Affiliate Income?

Although if you are employed, then you do not have to worry about paying affiliate income taxes, as it is deducted right at the source of income. However, if you have another source of income apart from your salary or you are a self-employed person, then you will need to fill out the self-assessment form with the HMRC.

Tax Implications on Affiliate income in UK

So, if you are earning through affiliate marketing, then you should definitely fill out the self-assessment form.

How are Affiliate Income earners classified?

Well, as per the laws in the UK, affiliate marketers or earners come under trades. Since all affiliate marketers are provided with a commission, the law and the government classifies such people as traders. So, if you are earning through affiliate marketing and have a job alongside, you will still be classified as a trader, and you will be required to pay affiliate income tax on such income by filling the self-assessment form.

Are there any Allowable Expenses?

When you are classified as a trader or a self-employed person, there are some expenses that you will require to run your business. These expenses could be the costs of telephone bills, running your website or any other cost. Such costs are deducted from profits, and you do not need to pay taxes on them. However, you will be required to pay taxes on the profit that remains.

How do you pay tax when you earn through Affiliate Marketing?

Affiliate income comes from affiliate marketing, and there are two ways to go about it.

  • First, if you are self-employed and your sole income is through affiliate marketing, you will not have to pay affiliate marketing tax on the entire sum you earn. So, until you have earned £120/week, you will not be required to pay tax. The amount of £120/week is the free allowance zone, anything above that you will need to pay tax as per the on-going tax rates.
  • If you have a job and you earn a sum through affiliate marketing as well, then you are liable to pay affiliate marketing tax on the entire sum. You will be required to get registered with the HMRC and know exactly how much you owe to the government.

As an Affiliate Marketer, do I need to pay VAT?

As a successful affiliate marketer, you need to check out VAT expenses. If your income is more than £82,000 in the past 12 months, then you will have to register for VAT as well.

What are the allowable expenses for Affiliate Marketers?

If you are an affiliate marketer then here aresome allowable expenses:

However, a point to remember is that there is no definitive list of allowable costs for affiliate marketers. All individuals who take part in affiliate marketing will have different costs, and the allowable costs will depend on the reason and the type of business.

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